Stock Exchange decline continues

Started several weeks ago and initially dismissed as a slightly negative correction, the drop in the prices of blue chips on the Bucharest Stock Exchange has turned the initial optimism of investors into concern. Those who bought in mid January thinking they would gain at least 50% in 2003 have lost 20%-30% of their money so far.
The official Stock Exchange index, BET, has lost 12% until now. Petrom, the largest company listed, fell to 1,000 ROL yesterday, the same price as the par value. This is an over 30% drop if considering its high last October. The market value of the company has shrunk by more than 250,000,000 dollars ever since the beginning of the year. The shares of Banca Romana pentru Dezvoltare (Romanian Development Bank – BRD) shed 10% in the last three trading sessions, while the bank’s capitalisation went down by $80 million. The most serious decline since early this year was registered by the financial investment companies (SIF), which lost 35% from last year’s highs and 28% from mid January on the average. The BET-FI index yesterday fell 2.3% and closed at less than 5,000 points.
Brokers are saying this serious drop in prices and liquidity over the last few weeks is happening for several reasons: the foreign investors preferring to sit and wait, the rush of small investors to turn shares into cash to avoid even more serious losses and the spreading of negative information about major companies.
“No matter how many small Romanian investors there are, the market was supported by the major foreign investors. As the latter have preferred to sit and wait lately due to the uncertainty of the international situation, prices have started to go down slowly but steadily,” Florin Aldea, Alpha Finance Romania head of operations says.
The brokers also blame certain Romanian officials for their carelessness, as they have released various pieces of information about Petrom’s future or the activity of the Financial Investment Companies on the market lately.
A high-ranking Government official was announcing last week that Petrom’s privatisation might be postponed if no suitable offers came in. This piece of information came to complete those already released by Industry minister Dan Ioan Popescu. The latter was saying a couple of weeks ago the Romanian State was contemplating the establishment of a petrochemical group to encompass Petrom’s related business.
The news released at the beginning of a year that was supposed to see Petrom’s privatisation on its way has made a negative impact on the small investors. “As long as there are still politicians announcing all sorts of concocted scenarios about listed companies, our market will remain small in every respect. Such news has confused the small investors who are now taking cash over shares. Furthermore, the foreign investors are now waiting to see what happens and I don’t think things will change any time soon,” Valerian Ionescu, CA IB Securities head of operations said. He added the price drop could maintain in the short run due to the uncertainty over a war against Iraq.